MORGAN Stanley is borrowing 225 billion yen (US$2 billion) from Citigroup Inc, Shinsei Bank Ltd and the Government of Singapore Investment Corp.
The move is to fund Japan's largest real-estate deal, three people familiar with the transaction told Bloomberg News yesterday.
Morgan Stanley will obtain senior loans from Citigroup and Tokyo-based Shinsei, and junior credit from GIC, the investment unit of the Singapore government, to fund its 281.3-billion-yen purchase of All Nippon Airways Co's 13 Japanese hotels, said the people, who declined to be identified.
Japan's commercial land prices rose for the first time in 16 years in the 12 months ended June 30, as international and domestic investors competed to buy properties.
Citigroup and Shinsei are looking for buyers of the senior loans worth 180 billion yen after the collapse of the United States subprime mortgage market prompted more than US$50 billion of writedowns at the world's biggest banks and pushed up borrowing costs.
"Japan's real-estate market is still hot but it is true banks are cautious about making exposure after seeing the absolute turmoil in the US and Europe," said Koyo Ozeki, head of Asia-Pacific credit research at Pimco Japan Ltd. "Debt investors have become more demanding in pricing as well."
The value of property in the Tokyo, Osaka and Nagoya regions gained 5.1 percent for the year ended June 30 from 0.9 percent a year earlier, the Ministry of Land, Infrastructure and Transport said on September 19.
Morgan Stanley agreed in April to buy the hotels, which include the ANA Intercontinental Tokyo in Roppongi, the capital's business and entertainment district, and three in the southern island of Okinawa that All Nippon valued at 150 billion yen as of March 2006, according to the Tokyo-based airline.
Rising land prices and a construction boom in Tokyo prompted Mori Trust Co and K.K. DaVinci Advisors to buy the Toranomon Pastoral Hotel with an auction bid of 231 billion yen. The deal was agreed upon in September.
Earlier this month, Goldman Sachs Group Inc and Aetos Capital LLC bought property manager Simplex Investment Advisors Inc for 154.1 billion yen.
"It might be too early to predict any falls in property prices as Japan has just seen a rise in prices but banks need to be careful about expanding real estate loans too fast," said Nana Otsuki, a credit analyst at UBS Securities Japan Ltd.